• The learne norms and beliefs we aquired from cultural evolution devleop slowly, more slowly than economic or technological changes.
• Cultural beliefs can become maladapted to their economic environment.
  • Cultural believes that benefit economic growth under one set of circumstance may harm another.
  • Cultural norms are slow to change, socieities may not be in position to tak advantage of the new opportunities
• Culture also matters becasue cultural beliefs can affect how instituions function.
  • Recall Grief's discussion in chapter 3.
• Cultural beliefs explain why poeple behave this way and why instituions encourage certain patterns of behavior in some context but not others.
  • This can explain why democracy have a tough time in middle east.

• Most of the supposed cultural differences pointed to the early 20th c.
• An aversion to such cultural stereotyping understandbly led economists of the late 20th century to dismiss culture as a cause of economic different societies.
• Going too far in the opposite direction may have been a mistake:
  • Research over the past 25 years demonstated the insight that studying culture offers.

• Argues that such values were essential for northwestern Europe's take-off in the 18th and 19th cenuries.
• One of the pimary obstical to frowth is the way people thought off and talk about work and profit.
• Example: (pg 68)
  • Greeks and Roman
    • Work of any type was among the lowest-value pursuits
    • Wealth was valued becasue it brought freedom and premitted leisure (Finley, 1973).
  • The bourgeois had little prestige in ancient socieity,
  • You were supposed to strive to own a land estate and live off its return if you were successful
• A society without value of hard working and profit seeking is unlikely to have sustained economic growth: (pg 68)
  • Technological innovation is essential for long run growth.
  • Innovation require detailed knowledge of production process and what can make prodiuction more efficient
  • Any society that frown upon hard work will be unlikely to have a robust class of innovators.
  • Society that disparages finance will be unlikely to have a thriving entrepreneurial class or investment in capital.
  • Cultural values that disparage hard work presisted through medival period, espeically among European elites (pg 69)
    • Elite don't work, they go to wars.
    • Lucky few from lower classes who rise up from the economic ladder were suppose to use their wealth to gain social status, for example bby acquiring a noble title.
    • Nobels were supposed to live off the fruits of their land, leaving behind their professions that gave them wealth.
    • McCloskey claims these cultural values changed in the northwestern Europe in 17th and 18th centuries.
    • In the Netherlands and later in England:
      • The pursuit of profit by the bourgeois class was lauded, not demonized.
      • The bourgeois were admired for their roles as financiers, innovators, and merchants.
      • These professions became aspirations for people in society.
    • Advancing economically:
      • It was seen as a means to climb higher on the social ladder.
      • Economic success brought social prestige.
    • Cultural changes:
      • Encouraged the best and brightest to engage in productive pursuits.
    • Emergence of a class of well-to-do merchants, financiers, and manufacturers:
      • They entered into the British elite.
    • Examples of individuals:
      • Sir Robert Peel (1750–1830):
        • Made his fortune in the textile industry.
        • Entered Parliament and became a baronet.
      • Joseph Chamberlain (1836–1914):
        • Started as a shoe manufacturer.
        • Transitioned into a career in politics.
• On the flip side, China: (pg 70)
  • World leader in technology and science for most of the last two millennia.
  • 1950, fallen behind Europe in technology ans science.

• How did China go from being scientific leader to technological laggard? (pg 70)

  • Landes (2006, p.7):
    • Summarized those line of taking when he noted that China failed to "realize the economic potential of tis scientific expertise involved the large values of society"
    • He dwells on cultural difference between Europe and China, he aruge that China lacked "this peculiarly European joy in discovery....This pleasue in tge new and better... This cultivation of invention."
    • Evidence of support is thin:
      • Landes does not provide a systematic explanation for the differntial incentives facing rulers and intellectural for China verses Eruopeas. But their are evidence of cultural disinclination towards innovation.

Weber(1905/1930): The Protestant Ethic and the "Spirit" of Capitalism

• According to his hypothesis, Calvinist doctrine of predestination influenced people to work harder and save more.
  • As this is how they could be "elected" to enter heaven.
  • This idea incentivze them to be hard-working, organized, frugal and engaged in productive pursuits.
• The idea of inspiration for this hypothesis came from Germany
  • Protestants seemed to do better than Catholics
  • Correction expand beyond Germany.
  • 
• Two issue of Weber's hypothesis
  • It need to be established that a "work ethich" can be responsible for economic growth.
    • In his book A farewell to Alms, Clark(2007) argued that taste of hard work bacme more promienent in England during the late medival and early modern periods.
    • This happened becasue the hard-working bourgeois had more surviving children to pass their cultural values.
    • Doepke and Zilibotti (2008) formalized Clark’s account.
      • They derive a model in which some people are thrigty and thus accumulate capital.
      • Ultimately, these people become economically dominant group in socieity.
      • However, increased in thrift alone is unlikely to been the driving factor of the economic divergence between North western europe and the rest of the world.
    • One problem is that individuals work harder in response to incentives.
      - Therefore, a lax work ethic(19th century Japan) is likely to be a response to low wages and opporunities for work as much as reflction of preference towards work.
  • The hypothesis is sorting out causation from simple corrlection.
    • The first prominent critic of Weber's thesis, Tawney(1936), pointed to an obvious flaw in the argument:
      • The capitalist spiritexist long before John Calvin came on to scene.
      • In the late medival, the Italiand city-states, the independent cities of germany Etc.
    • Akçomak, Webbink, and ter Weel (2016)
      • Presented similar evidence form the Netherlands, which suggest that t was well on path to modern capitalism prior to the Reformation.
    • Cross-country stuides connecting Protestantism to economic growth have produced mixed results:
      • McCleary and Barro (2006, 2019)
        • FInd that religous beliefs are correlated with economic growth across countries.
        • However, can have little about the relevant mechanism.

(Becker & Woessmann, 2009)

• The "Protestant work ethic" is proposed as a potential explanation for long-run economic differences across the world.
• Becker and Woessmann suggest an alternative channel connecting Protestantism and economic growth: literacy.
  • Martin Luther emphasized the importance of reading the Bible and produced the first widely used translation in the German vernacular.
• In the context of 19th-century Prussia, Becker and Woessmann find a positive relationship between Protestantism and education.
  • Figure 4.3 illustrates the relationship between the proportion of Protestants and school enrollment rates in Prussian counties.
  • 
• Protestant regions in Prussia exhibited greater economic output, income, and industrial employment.
• (Becker, Hornung, & Woessmann, 2011)
  • Protestant regions had an advantage in adopting industrial technologies.
• (Becker & Woessmann, 2008)
  • Protestant educational advantages led to a smaller gender gap in literacy rates and school enrollment.
• (Dittmar & Meisenzahl, 2020)
  • Protestant cities with compulsory schooling laws attracted individuals with elite levels of human capital.

Another channel that Potestantism may have affected economic growth is through politics.

• The Reformation upended the poloitical status quo.
  • State and citize that adopte the reformation teded to kick out the prevailing Church establishment and confiscate its welath.
    • Henry VIII(1509-47) dissolved the English monasteries.
      • The resulting welath transfer into royal coffers was the second greatest in English history.
• Rubin, 2017
  • Argued that the reformation allowed the protestant rulers to gain legitimacy via the Church.
  • In the medival period, the Church played an important role in providing legitimacuy to royal members.
  • A ruler in bad standing in the church are unlikely to last long.
    • The Church's ultimate punishment, excommuncation, could be a death knell to an insecure ruler.
  • Although the power of religious legitimaton had weakened by the end of 15th Century, but it was untile the Reformation until it collapse.
  • Political rulers could no longer turn to an independent church to prop up their regime
  • Religion remained importnat in the mind of poeple
  • Rubin aruged that, the Protestant rulers turned to parliament after religon.
    • Parliament tend to be comprised of powerful people
    • The more rulers needed parliament to stay in power, the more powerful these elite is.
    • Pariliment therefore tends to represent the interest of the economic elites.
  • According to Rubin, the ois why England and Dutch Repulic take off after the reformation, while Catholic Spain lagged behind.
• Cantoni, Dittmar, and Yuchtman (2018)
  • Found similat transition of power from religion to elites in the reformation in Germany.
  • They show that university graduates n Protestant region took more public sector job.

If Protestantism was good for growth, migh other religon be bad for it?
The answer depends on time and place, since it is unlikely that one religon is uniformly bad for economic growth.

• For instance, there was the "Golden Age of Islam" roughly in the 7-10th century.
  • Islamic middle east was far ahead of Western Europe in terms of Wealth, technology and culture.
  • 
• It is tough to swallow theories of economic growth that blame some attribute of Islam - such as its "conservation" of "mythical" nature(Weber, 1978; Landes, 1998; Lewis, 2002)
• However, this doesn't mean that we should discard all theories that regarding Islam.
  • Islam law covered numerous aspect of commercial life and as the law of many Mddle Eastern states.
• Kuran(2011)(77-78)
  • Numerious aspect of the Islamic law erer preogressive and benefited economic growth in the 7th to 10th century context in which they emerged.
  • These feature include
    • a relatively egalitarian(equality) inheritance system
    • An exntenisve corpus of partnership law
    • A law of trusts(waqf)
  • Why might these lawws, which served Middle Estern economies well in Islamic golden age, also been a source of stagnation
    • Kuran argued that, Islamic law is slow in responding to changes in economic conditions, but have little to do with religon.
    • There was simple little desire to change lwas regarding commerce.
  • Example:
    • Inheritance system:
      • Quite egalitarin for its day: women receive a share(half that of men, but better that zero which is the case of many parts of Europe
      • Numerous heirs were dedicated ny a pre-ordained formula.
      • This mattered for economic growth because of its effect on partnerships.
      • This matters to economci growth because of its effect on partnership.
    • Islamic partnership law:
      • Dictated that partnership were to be broken up upon the death of any partner.
      • Partner ship could in theory re-form, but this would take the cooperation of most of the partner's heirs.
        • If any of the heirs were in a bind, they could seek liquidation of the partnership's assets, potentially costing all involved.
      • In response to these incentives, Muslim merchats and entrepreneurs kept their partnership small and of limited partners:
        • The more partner and the longer the duration, it is more likely one of the parner would die and therefore forcing the partnership to dissolve
      • This also means there was little demand for change in law.
        • Even as European business arrangements were groing more complex, especially with
          • the introduction of tradeable shares
          • Use of corporat form
        • There are little incentive for Muslims to demand change to the law.
          • When the business in small by design, tradable share or corporate form, both help the growth of business, are useless
• Politics was another areana through which Islam may be affected economic growth:
  • Islam is good at legitimating ruele.
    • There is a corpus of Islamic doctire stating that Muslims shoudl follow any ruler who acts in accordance with Islam but depose those who do not(Rubin, 2011, 2017)
  • This made religion an attractive source of legitimacy for rulers who faced threats to their power.
  • Muslim religous authorities have a voice in political decision-making(Rubin,2017; Kuru, 2019).
  • WHile this is not necessarily bad, it can have detrimental consequences
  • The outsized importance of religious authorities in Muslim societies means
    • that ruler supported religous education at the expense of scientific and secular learning.
    • Chaney(2016)
      • following the consolidation of the Muslim religous establishment and the rise of madrasas(Islamic schools) in the 11-12 century
      • religious dominate production output in the Muslim world, and the scientificnproduction fell off a cliff.
      • The decline of science is probably due to the increase political power of religious elites.
• Blaydes and Chaney(2013)(pg 79)
• 
  • Aruge that a critical feature of Muslim politics was that rulers had access to slaver soldiers
    • They did not need to negotiate with other elites for military service or resources
  • Because European rulers did not have access to slave armies, they had to cede rights to feudal lords and parliaments.
  • Since power was not dspersed in the Middle East, there was also group of poeple, those without politcal power, benefit from a change in the status quo.
    • Therefore, revolts are common.
    • With the military power of non-rulers
  • In Europe, since powerful people tend to have an interest in mainting status quo.
    • Therefore, European rulers tend to last longer.
• Platteau(2017)
  - A related explanation oMiddle Eastern political instability
  - Argued that decentralised nature of Islam (opposed to the centralized nature of the Catholic Church)
  - There would always be radical clerics left out of the ruling coalition.
  - Those who spark a revolt against entrenched power.
  - As was the case during the 1979 Iranian revolution
  Charateristic of many Muslim society due to
• cominaton of politics and religon
• restriction due to the law
  might hinder economic growth.

Economic stagnation and political instabilty might be a by product lf how Islam was instruentialised by powerful eliets.

• Not able to punish cheater
• Must set up instituions to do this and facilitate trust
  • Such instituion can be costly to establish and maintain, and will not be worth it if the scale of trade is small
• As more trade opportunities arise,the benefit of establishing such instituion may be high enough to convince individualist soceties to adopt them
• These institutions permit trade with a much larger set of potential exchange partners.
• One in place, tjese instituion permit trade with a much larger set of potential exchange partners.

There are also some disadvantage in kin-based socieities:

• SInce their network are kin-based, there is little incentive to adopt costly, impersonal institutions.
• Limited trade partner due to no instituion, forgoing trade with much of the outside world.
• Consequence of economic growth is clear
  - As inter-retional trade became widespread and lucrative, those societies stagnated.
  China example:
• They clan was key unit in China for risk sharing and resource pooling.
• Clan memebrs suport each other, rotted in the Confucian ideology